How Payment Service Venmo Hatched and Later Sold to PayPal

It only took a few drinks -- and a much-younger Iqram Magdon-Ismail forgetting his wallet at home one night -- for him and his friends to come up with one of the most popular ways of splitting a bill: Venmo.

Magdon-Ismail is the co-founder of Venmo [pictured above], the payment service that allows people to send each other cash for any purpose whatsoever.

He spoke with the AP about how Venmo got started and how his unique upbringing helped spark the concept for Venmo, which is now owned by PayPal. Below are the highlights of the interview, edited for length and clarity.

Q: How did you and your co-founder come up with the idea for Venmo?

A: We came up with the idea over a series of brainstorming sessions. The first one was at a bar in Philadelphia where my friend was playing with his band. There's a common thing bands do where they pass a tip bucket around, and they were asking for everyone in the audience to give them cash to buy some beers at the end of the night if you enjoyed the show. And (Andrew) Kortina and I, the other co-founder of Venmo, were wondering about ways to tip the band without having to go down and put cash in the bucket, and that's kind of where the original idea for Venmo started.

We kind of let the idea sit for a while. About two or three weeks later I went up to visit him in New York and we were just hanging out. When I left my place I forgot to take my wallet. I had my BlackBerry with me, and then that's kind of when this behavioral concept of people always carrying their phones everywhere they go started to click with us.

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